President Barack Obama has warned Wall Street it should be “concerned” as
talks to extend America’s borrowing limit threaten to go to the wire.

“This time’s different. I think they should be concerned,” Mr Obama told US television.

“Democracy’s messy. But when you have a situation in which a faction is willing potentially to default on US government obligations, then we are in trouble,” he added.

The US government has been shut down for two days because of a political stand-off that economists fear will bleed into parallel talks about whether to extend America’s $16.7 trillion borrowing limit.

It is an annual negotiation that has continued right up to the deadline three times since Mr Obama came to power, and which stands to alter the course of America’s economic recovery.

Wall Street and Capitol Hill had been working on the assumption that the political circus would deliver the same result this year, but they are feeling less sure now that Congress has allowed the government to shut down before resolving their stalemate.

The Republicans have said they will only agree to the stop-gap budget measures needed to get the government back up and running if the White House agrees to delay the President’s flagship public healthcare scheme by a year.

The government shutdown - the first for 17 years - is expected to cost the US economy around $300m a day, according to analysts at IHS. Economists claim it could shave as much as 0.9pc from US GDP in the third quarter if it continues for three weeks, potentially wiping out America’s economic recovery.

Mr Obama’s warning came hours after Lloyd Blankfein, chief executive of Goldman Sachs, warned US politicians not use the threat of the country breaching its borrowing limit as a “cudgel” to try to force policy changes.

The investment banking chief, who was one of 15 business leaders to meet with Mr Obama on Wednesday afternoon, said that any attempt by Congress to use policy proposals as a weapon in their negotiations over America’s debt ceiling would have “extremely adverse” consequences.

“There is a consensus that we shouldn’t do anything that hurts this recovery.

“You can litigate these policy issues, you can relitigate these policy issues in a public forum, but they shouldn’t use the threat of causing the US to fail on its obligation to repay debt as a cudgel,” he said.

America is currently due to breach its borrowing limit on October 17, at which point the US government would have to cut spending by 20pc and would almost certainly default on its debt repayments. This would send interest rates up around the world, and could send the US back into recession, economists have warned.

Lloyd Blankfein, the chief executive of Goldman Sachs, urged American politicians not to use the threat of the country breaching its borrowing limit as a "cudgel" to force policy changes.

After a meeting with President Obama, Mr Blankfein said that any attempt by Congress to use policy proposals as a weapon in their negotiations over America's debt ceiling would have "extremely adverse" consequences.

"There is a consensus that we shouldn't do anything that hurts this recovery," the investment bank chief said. "You can litigate these policy issues, you can relitigate these policy issues in a public forum, but they shouldn't use the threat of causing the US to fail on its obligation to repay debt as a cudgel."

The US government has been shut down for two days after the Republicans said they will only agree to stop–gap budget measures if the White House delays Mr Obama's flagship health care scheme.

European Central Bank president Mario Draghi, who kept eurozone interest rates on hold at 0.5pc on Wednesday, added his voice to those urging both sides to end the stand-off. He warned that the shutdown could have wider consequences.

“If it were to be protracted, it’s a risk to the US and the world economy, we have to have this present in our minds,” Mr Draghi said.

His comments were echoed by Dara Khosrowshahi, chief executive of online travel giant Expedia, who attacked the dispute as “unnecessary” and told the US government it “isn’t helping” support the country’s “nascent recovery”.

He called for a swift resolution, and expressed disbelief that Congress had allowed the situation to escalate. “It sure seems unnecessary,” he said.